Asia stocks rally on US jobs relief, BoE looms
SYDNEY, July 11 (Reuters) – Asian share markets enjoyed a relief rally on Monday as upbeat U.S. jobs data lessened immediate concerns about health of the world’s largest economy, though long-run fallout from Brexit kept sovereign yields near record lows.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.75 percent, While Australia added 1.3 percent.
Japan’s Nikkei climbed 2.9 percent in the wake of a clear win by the government in upper house elections.
Prime Minister Shinzo Abe’s ruling coalition won a landslide victory giving it the power to potentially revise the nation’s post-war pacifist constitution for the first time.
The rebound came after news the U.S. economy added 287,000 jobs last month, well above median forecasts and recovering ground after a very weak May report.
In the end, investors concluded the data were not strong enough to revive the prospect of a rate hike from the Federal Reserve for the next few months, benefiting bonds and stocks.
The Dow gained 1.4 percent, while the S&P 500 firmed 1.53 percent and the Nasdaq 1.64 percent. The rise set the seal on an eight-session run that has seen U.S. equities add $1.4 trillion to market capitalisation.
There are around a dozen speeches and events scheduled for Fed officials this week, offering plenty of room for messaging.
One major event this week will be a Bank of England meeting on Thursday when it might well cut its 0.5 percent rate to offset the drag from the vote to leave the European Union.
Governor Mark Carney has already opened the door to easing , including the expansion of its 375 billion-pound bond-buying programme.
NO END TO UNCERTAINTY
The only question was timing, with analysts in a Reuters poll divided on whether a cut would come this week or in August.
Various reports out Monday argued for urgent action, with consumer spending falling last month, the business outlook darkening by the most in four years and economic activity in London slowing sharply.
"The outcome of the UK referendum has dealt a significant shock to the outlook for the global economy," warned Christian Keller, an economist at Barclays.
"It introduced a higher uncertainty about Europe’s future, and raised questions about globalization more generally," he added. "Confidence and financial channels could potentially propagate the effects to the U.S., China and beyond."
That was one reason bond yields in a range of countries had dived to record lows in recent days, while the pound has been at its weakest levels since 1985.
Sterling was stuck at $1.2948 on Monday, having failed utterly to rebound from the 13 percent loss suffered in the immediate wake of Brexit.
The Japanese yen eased a little to 100.80 per dollar, while the euro stayed on the defensive at $1.1043 having touched a low of $1.1003 on Friday.
In commodity markets, spot gold was a shade higher around $1,369.70 per ounce.
Crude prices edged down to near two-month lows on seasonally weak consumption, despite comments from Saudi Arabia’s oil minister that the oil market was becoming more balanced.
Brent crude was down 32 cents at $46.57 a barrel, while NYMEX crude fell 39 cents to $45.02.